US Goods-Trade Gap Widens for Second Month to Highest This Year

Date: Friday, May 31, 2019
Source: Sourcing Journal

The U.S. merchandise-trade deficit widened for a second month to the highest level since a record in December as exports dipped.

The goods-trade gap grew to $72.1 billion in April from $71.9 billion the month earlier, according to Commerce Department figures Thursday, slightly undershooting economist estimates for an increase in the deficit to $72.7 billion.

The figures precede this month’s escalation of the U.S.-China trade as President Donald Trump increased tariffs on goods from the Asian nation. The U.S. is also threatening to add levies on most remaining imports from China. In prior rounds of tariffs, companies had front-loaded purchases and bulked up inventories, which helped buoy growth in prior quarters but may drag on the economy later in the year.

Key Insights

The widening trade gap is the latest indication that Trump’s tariff war with China is weighing on business decisions. Foreign purchasers may also be balking at U.S. exports due to the strong dollar, while Chinese buyers could be continuing to pare shipments from America. Separate government data Thursday showed net exports and inventory accumulation added a combined 1.56 percentage point to the pace of gross domestic product growth in the first quarter, revised from a 1.68 percentage point-gain in the initial GDP report released last month. The 4.2 percent monthly decline in exports reflected broad-based drops across industrial supplies, capital goods, vehicles and consumer goods. A 2.7 percent decrease in imports was led by capital goods, vehicles, and industrial supplies.

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The report also showed wholesale inventories rose in the month as durable and non-durable goods increased. Retail stockpiles also advanced by the most in three months. Exports and imports of goods account for about three-fourths of America’s total trade; the U.S. typically runs a deficit in merchandise trade and a surplus in services. Thursday’s trade figures cover goods only. The Commerce Department will release the full April report on international trade June 6, which will include services and more details on merchandise shipments.

 

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